World Economy

TTIP deal: Obamatrade suffers a series of blows in Europe

U.S. President Barack Obama
Leigh Vogel | FilmMagic | Getty Images

BERLIN — It has been a bad week for one of President Barack Obama's signature trade goals.

And for once, it's not widespread resistance to the Trans-Pacific Partnership that is giving the White House headaches. This time, the political pressures are centered on the proposed agreement to loosen regulatory burdens between the European Union and the United States.

German Economy Minister Sigmar Gabriel said repeatedly over the last week that talks over the Transatlantic Trade and Investment Partnership (TTIP) have failed because U.S. negotiators refused to compromise. French Trade Minister Matthias Fekl, meanwhile, said on Tuesday that the current round of talks should be ended.

Those comments come despite Brussels' and Washington's official commitment to seal the deal before Obama leaves office in January.

"If the Americans don't move towards the Europeans, then Europe can't agree to a 'TTIP light.' And with this, the project — at least how it was all planned for this year — has failed," Gabriel said in a Tuesday news conference, according to Reuters.

Although the proposed free trade deal is still under negotiation, it aims to be roughly analogous to the Asia-focused TPP. The latter deal has surfaced again and again in the U.S. presidential election with supporters of both Bernie Sanders and Donald Trump railing against the proposed pact. But TTIP is relatively little-known to Americans.

In Europe, however, the TTIP is the topic of a lot of discussion, and it has elicited opposition from millions of people: About 3.5 million Europeans have signed onto a citizens' initiative calling on the European Union and its member states to cease trade negotiations with the U.S. and on a similar deal with Canada.

And while Gabriel blamed the stalled deal on American recalcitrance, popular resistance to TTIP has been based on wide-ranging objections to the proposed agreement.

The website for the anti-TTIP initiative lists nine separate arguments against the deal, but an overarching concern is that large multinational corporations will benefit from a deal while regular citizens suffer.

The 'ISDS,' and why people don't like it

One of the first concerns brought up by both experts and regular citizens is the establishment of a so-called investor state dispute settlement (ISDS) procedure in the deal. That system would allow large companies to sue countries in arbitration if they feel that any laws or practices are unfair given international standards.

The U.S. Trade Representative argues that the ISDS signals to investors a strong rule of law, and that it allows for conflict resolution before the state-to-state level. But anti-TTIP activists warn that ISDS could be used to subvert democracy, canceling the will of the people if a new law — such as one regulating environmental or health concerns — is found to unduly hurt a company's profits.

"It's a big threat to our legal system," said Ernst-Christoph Stolper, a spokesperson for STOP TTIP and a former state secretary for economic affairs in Rhineland-Palatinate.

He added that companies — not people — would be given more power to write the rules of the world economy in such a legal framework.

"This is a principal problem for representative democracy," adds Maritta Strasser, a lead trade campaigner for the nongovernmental organization Campact — which helped form the STOP TTIP alliance.

And those companies that could subvert democracy, Strasser said, are more likely to come from the U.S. than Europe.

"Maybe America could be a bully, maybe Europe could be a bully. But the U.S. is more likely — they have a bigger market, bigger corporations," she said, while acknowledging the irony that her own country, Germany, has been accused of bullying Greece within the euro zone.

Health and the environment

A frequently repeated rule is that the EU is much stricter about consumer protection and environmental concerns than the U.S. — relying on a so-called precautionary principle where products are not allowed into the market until proven safe. By contrast, the U.S. has laxer standards for market entry, but then levies harsher penalties on companies found to be harming people or the environment.

Many Europeans — especially here in Berlin — are quick to criticize the American approach as risking citizens' health for marginal profit gains, but experts frequently point to the success of American regulators in discovering and cracking down on cheating firms like Volkswagen.

Not everyone agrees, however, with the oft-repeated European truisms about the U.S. regulatory environment.

"These are just myths that have been blown out of proportion, but have been used very effectively by anti-trade forces," said Heather Conley, the director of the Europe Program at the Center for Strategic and International Studies. "The irony is that it was U.S. regulators that found out about European companies that were not following standards."

Stolper, for his part, suggested both regulatory systems are reasonably effective, but they'd be dumbed down if combined by the TTIP. Plus, he added, the double-checking nature of two unconnected systems was what allowed the discovery of VW's emissions test cheating in the first place.

But many still maintain their desire to keep American goods out of their markets.

"I don't want your food from the U.S. — that genetic stuff," said Christina, a 27-year-old speech therapist from Berlin who declined to give her surname. "So for me, it's maybe better if we don't trade. But not for you in the U.S."

Negative perceptions about U.S. products are so widely held, in fact, that American goods might not be able to succeed even if they are eventually allowed to enter European markets in the wake of a signed TTIP.

"This is emotional, it's very strong," Conley said. "Would [a U.S. good] really have much market penetration because of the emotions surrounding it?"

'There will be losers'

For decades, one of the few areas of agreement between mainstream economists has been the benefits of trade. Countries near-universally benefit, the argument goes, when they agree to mutually open up their borders for the exchange of goods and services.

(Click here for more of the arguments for and against trade)

To refute this long-held orthodoxy, the rationales for moderated trade necessarily delve into the realm of economic and political theory. In short, anti-TTIP activists allow that a country's GDP might see net gains from each and every free trade deal, but they argue that the losses suffered by working-class citizens (think about the former manufacturers of the American Rust Belt) are less socially desirable than the outsized increases to corporate executives' paychecks.

"What's for sure [with trade deals] is there will be losers, as there have been losers from NAFTA and other trade deals," Strasser said of workers and small businesses who suffer because of competition abroad. "Even if, overall, the benefits would be better than the losses — how do we compensate them?"

Most countries, including the U.S., have programs attempting to support and retrain those who suffer the ill-effects of trade. Still, critics argue these are not enough.


Supporters of TTIP have frequently charged anti-TTIP activists with peddling an anti-American sentiment wrapped up in quibbles about minor clauses in the agreement.

"In some ways this is a really good vehicle for anti-Americanism," said Conley, who noted that rhetoric about American bullies conflicts with the agreement's origin with German Chancellor Angela Merkel.

Still, there's frequently cited growth in negative German sentiment regarding the U.S.

"In Germany, the most potent anti-U.S. vehicle was about the NSA, Snowden and privacy … and all that anger, and all that sentiment has gone on to TTIP," Conley said.

Every anti-TTIP campaigner interviewed by CNBC strenuously denied those charges, saying instead that their movement was anti-corporate if anything.

"It's not about nations, it's about big corporations," anti-TTIP campaigner Strasser said. "If you accuse this of being anti-capitalist, I'd say: 'So what?'"

Some business leaders, usual supporters of trade agreements, charge that many of the TTIP critics don't fully grasp their own economic interests. The lower prices and business successes from trade ultimately benefit everyone, the argument goes.

"Especially talking about TTIP, in some parts of Europe, people are a bit reluctant because they do not really understand what's going on. It's a very complex matter," said Thilo Brodtmann, executive director of VDMA, a German engineering federation that represents more than 3,000 companies including giants Siemens and Bosch.

"For the first time, a free trade agreement has been taken on by politics and by unions on the street," he added.

But whatever the reasons behind STOP TTIP's success, the German populace has become impassioned by the debate.

"All Germans know what TTIP is," Stolper said, reflecting that "no one would have thought two or three years ago that people would be interested in trade politics."

For her part, Strasser laughs happily when asked about her movement's achievements.

"People said, 'Why are you wasting your time? It's going to pass anyway,'" she said. "Now I have the match point."

Still, Merkel and U.S. officials have insisted since Gabriel's comments that they will continue to push for a TTIP agreement, and businesses on both sides of the Atlantic are holding out hope.

"There will be more [international trade agreements] coming," Brodtmann said. "I think the TTIP is necessary and I also think the TTIP will come."

— CNBC's Elizabeth Schulze and Reuters contributed to this report